Consumers feeling less anxious

In good news for retail businesses and the economy, consumer anxiety has fallen to its lowest level in more than three years.

The latest NAB Consumer Anxiety Index fell from 60.2 in Q2 2016 to a three-year low of 59.2 in Q3.

The survey of more than 2000 Australians revealed while fewer consumers are cutting back on non-essential spending, consumer spending is still geared towards ‘essentials’ such as paying down debt, utilities and medical expenses.

“Consumers felt less stressed about their jobs, government policy and the cost of living, with anxiety related to their health spending and retirement funding unchanged,” notes NAB Group chief economist Alan Oster.

The biggest drivers of overall consumer anxiety were found to be the cost of living and government policy – with one in four Australian consumers reporting ‘high’ anxiety over their cost of living, compared to more than 1 in 3 in mid-2014.

The survey also shows consumer anxiety was strongest in Queensland and lowest in New South Wales and Victoria, where economic growth levels are highest.

In addition, women were significantly more anxious than men overall.

“Women reported higher stress for all drivers of anxiety, especially when it came to their retirement funding and the cost of living, and women aged 30-49 were also one of the very few groups still reporting above average levels of anxiety,” says Oster.

Divorced Australians, and the self-employed also reported high anxiety, with the lowest anxiety groups including men over 50, high income earners, young men and widows.

On a positive note, consumers were less anxious about their current financial position, with all drivers of household financial stress causing less concern.

According to the survey the biggest drivers of financial stress were financing retirement, providing for the family’s future, health expenditure and the ability to raise emergency funds.

“Men were better placed than women in all age groups to meet their basic living expenses and unforeseen expenses. Having a higher income also helps a lot,” says Oster.

NAB is anticipating moderate but easing household consumption growth over the next few years.

“While clearly more downside risks to the consumption outlook have emerged, they should be partly offset by the positive impetus stemming from a sustained low interest environment and renewed strength in house price growth, especially in Sydney and Melbourne,” the survey notes.

A snapshot of spending behaviours by state for Q3 is as follows:

New South Wales: NAB highlights spending behaviours in NSW/ACT were largely unchanged in Q3. “There were some cutbacks in medical, transport and credit use, but more consumers increased spending on major household items, travel, charity and saved more.”

Queensland: More consumers spent on “non essentials”, such as home improvements, travel, eating out, charitable donations and personal goods. “The number of consumers in Queensland that have cut back their spending on ‘non-essentials’ over the past year is also noticeably lower.”

Victoria: Victorian consumers spent more on transport and travel, but cut back on credit card use, spending on children and entertainment.

Western Australia: NAB says there was a notable increases in the number of local consumers spending more on charitable donations, their savings, superannuation and investments and on utilities compared to the last quarter. “Spending fell in just 2 areas - credit usage and on medical expenses.”

South Australia: There was a jump in the number of consumers saving more, as well as an increase in consumer spending on groceries and utilities and ‘non-essentials’ such as entertainment, travel and major household items.

Tasmania: spending remains volatile according to NAB, with big increases in the number of consumers spending more on home improvements, major household items, their savings, utilities, personal goods and medical, while fewer consumers increased spending on eating out, their children or used credit.